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How the Secure Act Could Affect Your Estate Plan

How the Secure Act Could Affect Your Estate Plan

On January 1, 2020, a federal law went into effect that can have a significant impact on your estate planning regarding retirement accounts. The law, called the Setting Every Community Up for Retirement Enhancement Act (SECURE Act), changes the guidelines for the payout of retirement savings to beneficiaries after the account holder passes away.

Prior to this year, beneficiaries could generally receive distributions over time through their life expectancy. This allowed them to earn tax-deferred returns on the investments. The SECURE Act now limits a beneficiary’s ability to stretch out payments for certain beneficiaries. The tax implications will now be different for these beneficiaries, so it is important to discuss this with your estate planning lawyer to adapt your estate plan if needed to protect the interests of your beneficiaries.

Accelerated Payout Timelines

Some beneficiaries - such as your children or a trust benefitting your children - will be required to receive all distributions they are owed within ten years. This is a much shorter time than if they took minimum distributions over the course of their lifetimes. This also significantly increases income tax liability during this ten-year period for many people.

The ten-year term requires all payments to be made by December 31 following the tenth anniversary of the plan participant’s death. While beneficiaries can take distributions before the ten-year deadline, they are not required to do so.

Considerations Regarding the Ten-Year Rule

Estate planning attorneys will take the new rules under the SECURE Act into consideration when planning for clients with retirement accounts. There are different factors to take into account, including:

Tax laws and other regulations are constantly changing, and they can have significant effects on your estate and beneficiaries. You want to ensure you have the right legal guidance from a lawyer who knows how changes in the law might impact your estate plan.

Consult with a Santa Ana Estate Planning Attorney Today

If you would like to discuss creating an estate plan or you would like to learn whether you need to adjust your existing estate plan due to the SECURE Act, contact the Law Offices of Roshni T. Desai. Call 714-442-2340 or contact us online to set up a consultation with an experienced Santa Ana estate planning lawyer. We are ready to help you make the right choices for your beneficiaries.